Incentive Plans That Work

Target programs to individual employees, and tie rewards to measurable activity.

A pat on the back often works better than a kick in the rear, but both are effective incentives to do better work. Managers agree that a systematic incentive plan can motivate employees to operate at their peak level of performance. And while that kick-in-the-rear plan may be a good stress reliever for the boss, it's seldom an employee favorite.

"A successful incentive program addresses the unique needs and work activities of each person on your payroll," says Bill Lee, president of Lee Resources in Greenville, S.C., a consulting firm in the building-materials field. He points out that the program should focus on key activities that improve the business's operation or gain more sales. An incentive plan shouldn't simply punish employees for not reaching set goals (especially if the goals were arbitrarily high or were set without employee input).

Not all employees respond to the same rewards, so programs must be targeted to individual employees to succeed. The program's purpose should be to reward people for doing well by giving them something they value. The key is to find out what that something is, and it varies among people.

Cash Is Not Always the Answer

The obvious answer — cold, hard cash — isn't always the best one, Lee says. Surprisingly enough, some people don't respond to it. It may be little more than pocket change for salespeople at upper levels of income, while other employees immediately apply it to everyday expenses and forget its origin. Paying off a Visa bill alleviates a worry, but it doesn't give you many pleasurable moments to savor.

If you use money as a reward, its presentation should be separated from paychecks, Lee says, or else it can be taken for granted or misunderstood. Using a special ceremony to distribute these rewards helps distinguish them.

Gifts can be a tangible show of appreciation that sticks around as a reminder, he says. Gift certificates ensure that employees can select their own reward, but other types of awards — including certificates to hang on the wall or premiums supplied by manufacturers — can achieve the same result.

Time off provides an option that works well for remodelers, since it doesn't require a dip into petty cash. Time-off "coupons" can be awarded for achieving desired requirements, such as reaching certain sales levels or maintaining 100 percent on-time work attendance. These can be broken into increments as small as desired. It can include a free lunch, a movie rental or another associated perk.

Tie Rewards to Results

To avoid concerns about subjectivity, incentive programs must be tied to some type of measurable activity. Virtually every employee can be tracked by some measurement that the employee and the supervisor agree reflects the desired results. If sales goals are met, everyone connected to achieving those sales should be rewarded, not just the salesperson who delivered the signed contract, Lee stresses. If a company values teamwork, it must treat its employees as team members.

Providing ongoing feedback to employees and involving them in decision-making aspects of the company also are top-notch ways to make them feel closer to the operation. The goal is to make employees see that their success is closely tied to the success of the company.

Even if they are working well, the programs should be temporarily discontinued occasionally, he adds. Otherwise employees learn quickly to take them for granted, especially if the goals are too low or rewards are achieved routinely. A program that can be considered part of the employees' regular compensation will hurt morale when it’s removed and create an anti-incentive program. Incentives work well when they’re occasional special events, not part of the daily routine.

Creating successful incentive programs not only improves the company's operation but can reduce turnover — a key ingredient in keeping a business on a smooth upward track. "In today's environment, employees don't have to put up with disrespect from management," Lee says. "Communication between management and the workforce is critical to holding on to quality personnel."

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